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Received: 12 January 2018 Revised: 3 May 2018 Accepted: 2 June 2018

DOI: 10.1002/bse.2191

RESEARCH ARTICLE

Entrepreneurial orientation, environmental sustainability and


new venture performance: Does stakeholder integration
matter?
Joseph Amankwah‐Amoah1 | Albert Danso2 | Samuel Adomako3

1
Kent Business School, University of Kent, UK
2
Abstract
Leicester Business School, De Montfort
University, Leicester, UK Previous research has theorised that the link between entrepreneurial orientation
3
School of Management, University of (EO) and performance is mediated by environmental sustainability orientation (ESO).
Bradford, Bradford, UK
However, firm‐level factors that may moderate this relationship are lacking. This
Correspondence
Joseph Amankwah‐Amoah, Kent Business paper attempts to fill this gap by examining how and when EO enhances new venture
School, University of Kent, UK. performance by considering ESO as mediator and stakeholder integration as an
Email: j.amankwah‐amoah@kent.ac.uk
important contingent factor. Using primary data obtained from 242 chief executive
officers/entrepreneurs, it was found that the indirect relationship between EO and
new venture performance is strengthened at high levels of stakeholder integration.
Theoretical and practical implications are discussed.

KEY W ORDS

entrepreneurial orientation, environmental policy, environmental sustainability orientation, Ghana,


new venture firms, stakeholder engagement, stakeholder integration, sustainable development

1 | I N T RO D U CT I O N recent times, research on entrepreneurial sustainability orientation


has grown exponentially, not only in the entrepreneurship literature,
In the past, incumbent and new ventures could afford to overlook but also across the social science disciplines including marketing, strat-
environmental sustainability issues as a costly exercise which may egy and operations management (Moyano‐Fuentes, Maqueira‐Marín,
yield little or no benefit. Environmental sustainability orientation & Bruque‐Cámara, 2018; Varadarajan, 2017).
(ESO) reflects “the overall proactive strategic stance of firms towards A noteworthy hallmark of many large corporations in the 21st cen-
the integration of environmental concerns and practices into their tury has been the adoption of environmental sustainability policies to
strategic, tactical and operational activities” (Roxas & Coetzer, 2012, demonstrate care for the environment (Moyano‐Fuentes et al., 2018;
p. 464; Roxas, Ashill, & Chadee, 2017; York, O'Neil, & Sarasvathy, Schillo, 2011; Varadarajan, 2017). Their desire to engage with sustain-
2016). Until recently, it was not uncommon for ESO not to feature ability enables market‐seeking and efficiency‐seeking firms to reposi-
in a new venture business plan or strategy. In recent years, environ- tion themselves by addressing environmental concerns (Adams,
mental sustainability has gained prominence and governments, Jeanrenaud, Bessant, Denyer, & Overy, 2016; Nidumolu, Prahalad, &
through regulations and laws, have also forced many firms to become Rangaswami, 2009). There are other principal motives for firms, includ-
more environmentally friendly (Criado‐Gomis, Cervera‐Taulet, & ing reputation‐seeking through being seen to be green, and efficiency‐
Iniesta‐Bonillo, 2017; Quan, Wu, Li, & Ying, 2018; Roxas & Chadee, seeking by capitalising on government incentives such as subsidies and
2012). By being mandated by laws and regulations, small firms are tax relief for sustainability‐oriented initiatives. Indeed, environmental
often left with no option than to comply with costly guidelines and sustainability has emerged as a pivotal driver of firm innovation
regulations, which can hamper their competitiveness. At the same (Nidumolu et al., 2009). By being seen to be green and engage in sus-
time, other stakeholders including customers and non‐governmental tainability issues, firms can improve their reputation and consumers'
organisations (NGOs) are demanding that firms develop sustainability perception of their brands. However, in spite of these trends, some
orientation (Neutzling, Land, Seuring, & do Nascimento, 2018). In company executives still remain unpersuaded by the benefits of

Bus Strat Env. 2018;1–9. wileyonlinelibrary.com/journal/bse © 2018 John Wiley & Sons, Ltd and ERP Environment 1
2 AMANKWAH‐AMOAH ET AL.

environmentally friendly activities, while others question whether such 2 | THEORETICAL BACKGROUND AND
activities could actually lead to erosion of their firm's competitive HYPOTHESES
advantage and hard‐won market share (Nidumolu et al., 2009).
In spite of the burgeoning stream of research on environmental
2.1 | Entrepreneurial orientation
sustainability and innovation (Adams et al., 2016), the linkages
between entrepreneurial orientation (EO), environmental sustainability EO originates from the strategic choice literature (Child, 1972) which

and stakeholder integration still remain underexplored (Neutzling encompasses firm‐level policies and practices that allow a firm to take

et al., 2018). Specifically, previous research has addressed the mediat- advantage of entrepreneurial opportunities (Lumpkin & Dess, 1996).

ing effect of ESO on the relationship between EO and venture perfor- EO focuses on an organisation's strategic posture reflecting

mance (Roxas et al., 2017); however, the conditions under which this proactiveness, innovativeness and risk‐taking (Covin & Slevin, 1989).

relationship is more or less effective have not been explored. That is, Innovativeness denotes a firm's propensity to engage in new ideas in

it is not clear whether the integration of stakeholder issues in entre- order to activate a process that results in new products, services or tech-

preneurial‐oriented ventures helps to boost ESO, and whether the nological progress (Covin & Slevin, 1991). Proactiveness reflects high‐

effect of ESO on the performance of new ventures is improved level, opportunity‐seeking behaviour that shows a firm is ahead of its

through greater stakeholder integration. The paucity of research in competitors with anticipation of future customer demands. Risk‐taking

this area is surprising given that such decisions made with incomplete represents the practice of taking action in unknown business areas

information by new ventures are more likely to lead to a misallocation and/or the commitment of significant resources to business activities

of scarce resources. Accordingly, the authors seek to answer the fol- which might have uncertain consequences (Lumpkin & Dess, 2001).

lowing question: How does stakeholder integration moderate the indi- Broadly, EO research shows that EO relates to firm performance

rect effect of EO on new venture performance? (Lee, Lee, & Pennings, 2001; Rauch, Wiklund, Lumpkin, & Frese,

This study offers several contributions to entrepreneurial orienta- 2009; Wiklund & Shepherd, 2005). As such, EO is an important firm

tion and environmental sustainability literature. First, much of what is capability (Alvarez & Busenitz, 2001; Lumpkin & Dess, 1996) that

known regarding environmental sustainability comes from large firms helps small firms to achieve sustained competitive advantage (Wiklund

and multinationals (Aykol & Leonidou, 2015; Roxas et al., 2017). & Shepherd, 2003). These capabilities include the provision of skills to

Indeed, large firms are well endowed in terms of slack resources, equip the organisation to be able to utilise its internal resources and

expertise and the ability to spread risk of sustainability across related exploit external resources (Wiklund & Shepherd, 2003). For example,

activities compared with new venture firms. By focusing on whether a firm's proactiveness enables it to identify and generate resources

small and resource‐poor businesses that engage in sustainability orien- to support its strategic business trajectory (Roxas et al., 2017). Simi-

tation and stakeholder integration can match firms with stronger EO larly, it has been suggested that small resource‐constrained firms need

to achieve an overall improved performance, this study fills a lacuna to be innovative by integrating environmentally friendly corporate pol-

in the literature on environmental sustainability and entrepreneurial icies into their overall strategic goals (Martín‐Tapia, Aragón‐Correa, &

orientation (Wiklund, 1999; Wiklund & Shepherd, 2005). Thus, it adds Rueda‐Manzanares, 2010). Hence, EO is an important strategic orien-

to the limited literature on EO and ESO of small businesses in devel- tation for a small firm's ESO development.

oping countries.
In addition, although a plethora of past studies have suggested a
need for firms to adopt ESO (Roxas et al., 2017; Roxas & Chadee,
2.2 | Environmental sustainability orientation
2012), a solid understanding of whether the integration of stakeholder A new venture's environmental sustainability orientation decisions do
issues can enhance the indirect effect of EO on new venture success not emerge from a vacuum, but rather are a reflection of the expertise
is lacking. In this direction, this study contributes to the literature by and resources possessed by that venture which drive such a decision
testing whether such an approach leads to improved performance. (Goncalves, Robinot, & Michel, 2016). The natural resource‐based
Furthermore, there is an overwhelming emphasis on the activities of view (NRBV) (Hart, 1995) argues that an organisation can concurrently
firms in developed countries on entrepreneurial orientation and envi- carry out its functions in an environmentally friendly manner and still
ronmental sustainability. Given that firms in emerging economies achieve superior performance. Previous studies indicate that it pays
often lack legitimacy and operate under different underdeveloped to be green for some firms (Hart & Ahuja, 1996). By implementing
institutional environments, insights from developed countries' firms environmentally friendly policies and introducing such products, firms
offer limited or no useful insight (Roxas et al., 2017). This study con- are more likely to improve their efficiency, leading to the development
tributes to the current literature on ESO by focusing on an emerging of a superior source of competitive advantage (Aragón‐Correa &
economy. Sharma, 2003; Hart, 1995). By eliminating and recycling waste, firms
The rest of the paper is organised as follows. It begins by stand a better chance of achieving stakeholder integration while con-
reviewing the relevant literature on EO and ESO. Based on the review, currently improving their competitiveness.
the hypotheses are derived. Next, the research methodology and The sections that follow present arguments leading to the deriva-
approaches to data collection and analysis are explained. The penulti- tion of the hypotheses. That is, the following sections examine the
mate section outlines the key findings from the test. The theoretical potential moderating role of stakeholder integration on the relation-
and practical implications for entrepreneurship and innovation are ship between EO and ESO. In addition, they present arguments lead-
then examined. ing to the view that the relationship between ESO and new venture
AMANKWAH‐AMOAH ET AL. 3

performance is moderated by stakeholder integration. Figure 1 performance (Roxas et al., 2017). However, the resource constraints
presents the conceptual model and hypotheses. can also serve as an incentive which forces such firms to become more
innovative and frugal in using their limited resources (Mosakowski,
2002). Accordingly, stakeholder engagement may enable SMEs to
2.3 | Potential moderating effect of stakeholder
accrue benefits to such an extent that it may help them to offset
integration any limitation stemming from the lack of key financial and managerial
Previous studies have demonstrated that resource constraints such as resources needed to achieve business success. Accordingly, it is
a shortage of skilled employees and institutional obstacles such as proposed that:
legal and regulatory restrictions and inadequate infrastructure can
H2: The positive effect of ESO on new venture
greatly curtail innovation and the activities of small and medium‐sized
performance will become more positive when stakeholder
enterprises (SMEs) (Pissarides, 1999; van Burg, Podoynitsyna, Beck, &
integration is greater.
Lommelen, 2012). Indeed, lack of financial resources inhibits a firm's
ability to explore new ideas to innovate (De Carolis, Yang, Deeds, &
Nelling, 2009) and achieve greater viability (Eisenhardt &
3 | RESEARCH METHODOLOGY
Schoonhoven, 1996). Nevertheless, some studies indicate that the
resource constraints faced by firms can actually force them to inno-
3.1 | Research context
vate (Hoegl, Gibbert, & Mazursky, 2008). Given that resource con-
straints are highly impactful in emerging economies, there is a The hypotheses were tested using a sample of SMEs in Ghana, an
strategic imperative for SMEs to identify a niche to enhance their emerging sub‐Saharan African nation. Ghana was used as the research
chances of success. One effective mechanism for such firms to setting for several reasons. First, Ghana has successfully implemented
enhance their competitiveness and achieve visibility is through stake- a sound economic transformation and an open market policy for more
holder engagement and ESO. Such strategic orientation helps them to than three decades, offering a rich contextual setting for examining
not only draw on key stakeholders' experiences and insights, but also how Western market theories apply to emerging market settings. Sec-
to develop and design products more in tune with their needs. It thus ond, Ghana has practised democracy since 1992, making the country a
follows that an even closer relationship between a firm and its stake- valued place for foreign direct investment in West Africa (World Bank,
holders would not only lead to innovation, but also to a much 2011). Third, since the early 2000s, the country has initiated a host of
improved performance (Nidumolu et al., 2009). This is important, given market and industrial reforms aimed at encouraging businesses to
that such an alignment is more likely to lead to first‐mover advantage adopt environmentally friendly measures including recycling of waste,
and minimise mismatches between stakeholders' requirements and a and protecting local forest and rivers. The Government has also
firm's expectations. Based on the above analysis, it is proposed that: imposed restrictions on importation and explored e‐waste recycling
to create incentives for firms to recycle. The country is also considered
H1: The positive effect of EO on ESO will become more
to be representative of emerging economies in West Africa (Julian &
positive when stakeholder integration is greater.
Ofori‐Dankwa, 2013), thus providing a conducive business environ-
Given that new venture firms experience liabilities of newness ment in which to test the hypotheses (Amankwah‐Amoah, 2016).
and smallness (Stinchcombe, 1965) which limits their ability to obtain
and utilise resources, these could curtail their environmental sustain-
ability drive. In the case of emerging markets, such firms also experi-
3.2 | Sample and data sources
ence “liability of origin” (Amankwah‐Amoah & Debrah, 2017, p. 212), The sampling frame of the study was derived from the Ghana Business
where their geographical location can actually become a liability which Directory and Registrar General's Department databases (Acquaah,
curtails their ability to collaborate with other firms and access scarce 2007). In total, 1200 manufacturing SMEs (650 businesses from a total
resources and expertise. It is well established that new ventures are of 11 000 in the Ghana Business Directory database, and 550 busi-
often characterised by the lack of both a highly skilled workforce nesses from a total of 14 000 in the Registrar General's Department
and financial resources, which reduces their ability to innovate database) were contacted via telephone to ask for their participation
(Díaz‐Díaz, Aguiar‐Díaz, & De Saá‐Pérez, 2008). It follows that SMEs in the study. The 1200 SMEs sampled were those that met the Ghana
may lack the necessary human and financial capital to engage in Statistical Service's criteria for SMEs (Ghana Statistical Service, 2000):
sustainability‐related issues, which can erode or undermine a firm's only SMEs employing a minimum of five and fewer than 250

FIGURE 1 Conceptual model of the study


4 AMANKWAH‐AMOAH ET AL.

employees, and those with an annual turnover < US $20 million, were sustainability, environmentally sustainable practices and commitment
considered. This criteria is in line with extant entrepreneurship studies to environmental sustainability (Roxas et al., 2017). A firm's knowledge
(Adomako, Danso, Uddin, & Damoah, 2016; Cardon & Kirk, 2015). about sustainability was measured with five items while its environ-
Four hundred and fifty‐five SMEs (37.9% of the original 1200 SMEs) mentally sustainable practices were captured with eight items. A firm's
agreed to take part in the study. commitment to environmental sustainability was evaluated with four
The data collection was carried out in two phases. In the first items. A composite of the three dimensions constitutes the variable
phase, the 455 SMEs were hand‐delivered a questionnaire, which score for ESO (α = 0.95).
Chief Executive Officers (CEOs)/entrepreneurs were asked to com-
plete. After several reminders, a final total of 319 completed question- 3.3.3 | Stakeholder integration
naires were received (a 70.10% response rate). To ensure that only Stakeholder integration was conceptualised as a three‐dimensional
CEOs/entrepreneurs had completed the questionnaires, several com- construct, entailing firms' knowledge of stakeholders, interaction with
pleted questionnaires were selected, and their respondents were stakeholders, and adaptation to stakeholder demands (Plaza‐Úbeda,
contacted by telephone to confirm this was indeed the case. de Burgos‐Jiménez, & Carmona‐Moreno, 2010). A firm's knowledge
To attenuate the possibility of common variance influencing the of its stakeholders was measured with four items. Similarly, four items
integrity of the data (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003), captured its level of stakeholder interaction. Finally, five items evalu-
the second phase of the data collection took place six months after ated its adaptation to stakeholder demands. The stakeholder integra-
the first phase of the survey. On this occasion, finance managers at tion scale (α = 0.90) is the mean value of the composite measures of
the 319 SMEs were asked to complete another questionnaire knowledge of stakeholders, interaction with stakeholders and adapta-
evaluating firm performance. After a maximum of three reminders had tional behaviour.
been sent, a total of 250 complete responses were received (a 78.36%
response rate). After cross‐checking the second survey against the first 3.3.4 | New venture performance
survey, it was discovered that eight of the CEOs/entrepreneurs were Seven subjective items captured new venture performance (Luk et al.,
also the finance managers. Therefore, those eight questionnaires were 2008; Sheng, Zhou, & Li, 2011). Respondents were asked to compare
discarded, leaving 242 completed responses for the analysis (a 53.18% their firms with their competitors in the industry over the last three
effective response rate). years. A composite of the seven items yielded excellent reliability
On average, each firm had been in existence for seven years and (α = 0.97). Subjective performance measures were used due to diffi-
employed 66 full‐time employees; the average growth rate was culties in obtaining objective accounting data in emerging economies
11.22%. To investigate the possibility of non‐response bias, the early (Hoskisson, Eden, Lau, & Wright, 2000). The use of subjective perfor-
and late respondents were compared in terms of firm age, size and mance measures is appropriate given that “CEO perception of perfor-
growth rates. Since no significant differences were found between mance can be regarded as an important independent variable in and of
these two groups, it was concluded that non‐response bias did not itself” (Powell, 1992, p.125).
influence the data (Armstrong & Overton, 1977).
3.3.5 | Control variables
3.3 | Measures This study included four control variables to account for their effects on
the dependent variables. These were firm size, firm age, market scope
All the constructs that measured the dependent and independent var-
and prior venture growth. First, firm size was measured as a logarithmic
iables were taken from previous studies. The items were measured on
transformation of the number of full‐time employees (Sheng et al.,
a seven‐point Likert scale ranging from 1 = strongly disagree to
2011). Second, firm age was measured as a logarithmic transformation
7 = strongly agree.
of the length of time each firm had been in existence (Akgün, Keskin, &
Byrne, 2012). Market scope was controlled for as a dummy variable
3.3.1 | Entrepreneurial orientation
(0 = local; 1 = international). Finally, since previous studies indicate that
Entrepreneurial orientation (α = 0.95) was measured by adopting
prior growth influences venture growth (Baum & Locke, 2004), this
Covin and Slevin's (1989) nine‐item scale which captures a firm's
study controlled for this variable. This study followed Baum and Locke
degree of innovation (new product introduction), risk‐taking (proclivity
(2004) and calculated prior growth as the percentage change in sales
to take high risk) and proactiveness (strategic actions considered as
and employment during 2014–2016 as = (2014/2016) ‐ 1.
bold and wide‐ranging). This study followed previous studies (Covin
& Slevin, 1989; Miller, 1983) and adopted the composite dimension
approach to define a firm's EO. This approach suggests that three 3.4 | Validity and reliability tests
dimensions work together and that a venture is considered entrepre- Prior to the confirmatory factor analysis, several tests were conducted
neurial when it exhibits high risk‐taking, proactiveness and innovative to assess the possibility of common method bias influencing the integ-
behaviour collectively. rity of the results. First, a Harman's (1967) one‐factor test was con-
ducted. To do this, all the self‐reported measures were entered in
3.3.2 | Environmental sustainability orientation exploratory factor analysis (EFA) using the principal factoring and
Environmental sustainability orientation was captured by using the varimax rotation. Ten factors emerged with eigenvalues >1, account-
three‐dimensional scale entailing knowledge about environmental ing for 83.33% of the total variance, with the first factor accounting
AMANKWAH‐AMOAH ET AL. 5

for 23.14%. This indicates that common‐method variance is not a SRMR = 0.16), suggesting that the model did not fit the data well. The
threat to the integrity of the results. results show that the chi‐square difference between the two models
Nevertheless, Harman's (1967) one‐factor test is inconclusive, was significant at p < 0.001. Moreover, all the items in Model 2 loaded
hence this study utilised the procedure recommended by Cote and well on their respective latent variables. This suggests that Model 2
Buckley (1987) and estimated three competing common method bias performed better than Model 1.
nested models (Table 1). Model 1 examined the trait‐only model, In addition to the discriminant validity, the Cronbach's alpha and
allowing all the indicators to load on a single latent factor. In Model composite reliabilities of the measures were inspected. The results
2, the method‐only model was estimated, where each indicator was show that Cronbach's alpha values were > 0.70 while composite
allowed to load on its respective latent factor. Finally, Model 3 intro- reliability values were > 0.60. These results provide support for the reli-
duced a trait and method model which combined Models 2 and 3 ability of the measures used in the study (Bagozzi & Yi, 2012). Next,
where a common factor links all the indicators in Model 2. When the each factor loading was examined to establish convergent validity of
goodness‐of‐fit heuristics were inspected, Models 2 and 3 showed a the scales. Findings from the analysis indicate that each factor loading
better fit than Model 1. In addition, Model 3 did not perform substan- exceeded the traditional threshold value of 0.40. This shows that con-
tially better than Model 2. These results suggest that common method vergent validity was achieved in this study (Anderson & Gerbing, 1988).
variance does not influence the results of the study. Finally, the overall fit of the model was assessed using a number
Subsequently, discriminant validity of the variables was investi- of fit heuristics including the chi‐square (χ2). The overall CFA produced
gated prior to hypotheses testing. Although the variables examined an excellent model fit (χ2/df = 3.61; RMSEA = 0.04; NFI = 0.98;
in the current study are theoretically different, a confirmatory factor NNFI = 0.95; CFI = 0.98; GFI = 0.96; SRMSR = 0.05). These results
analysis (CFA) was performed using LISREL 8.5 software with the show the robustness of the overall fit of the measurement model.
maximum likelihood approach. The square roots of the average
variance extracted (AVE) for each construct were calculated and
inspected. This approach allows the establishment of empirically 4 | ANALYSES AND RESULTS
discriminant validity of the variables.
In constructing the CFA, a one‐factor and a two‐factor model Table 2 shows the mean, standard deviation and inter‐construct corre-
were formed. The model fit of each model was inspected using the lations for the variables. It indicates that EO correlates positively with
chi‐square difference test to establish which of the models provided ESO, and that ESO is positively related to new venture performance.
a better fit for the data. Results from the CFA show that Model 2 The results of the moderated mediation analyses are presented in
(the two‐factor model) entailing EO and ESO fits the data excellently Tables 3 and 4. To test the hypotheses, hierarchical regression analysis
2
(χ /df = 3.42; RMSEA =0.03; CFI = 0.95; GFI = 0.97; NFI = 0.91; was used. To assess whether multicollinearity affects that data, the
SRMR = 0.05). The one‐factor model produced the following fit heu- mean‐centring method was adapted using all the variables involved
ristics (χ2/df = 7.33; RMSEA = 0.08; CFI = 0.73; GFI = 0.67; NFI = 0.59; in the interaction. The highest variance inflation factor (VIF) is 2.10

TABLE 1 Common method bias‐nested models: goodness‐of‐fit statistics

Model χ2 df χ2/df RMSEA CFI NNFI NFI GFI SRMR


Model 1: Trait 2454.85* 869 2.58 0.23 0.32 0.33 0.40 0.55 0.03
Model 2: Method 1629.30* 825 1.97 0.04 0.93 0.95 0.97 0.92 0.05
Model 3: Trait‐method 1358.15* 1004 1.35 0.02 0.96 0.97 0.98 0.96 0.05

*p < 0.001.
df, degrees of freedom; RMSEA, root mean square error of approximation; CFI, comparative fit index; NNFI, non‐normed fit index; NFI, normed fit index;
GFI, goodness‐of‐fit index; SRMR, root mean square error of approximation.

TABLE 2 Descriptive statistics and inter‐construct correlations (square root of average variance extracted in diagonal)
Variables Mean SD 1 2 3 4 5 6 7 8
a
1. Firm‐size (full‐time employees) 66.09 45.22
2. Firm agea 7.22 5.49 0.37**
3. Market scope 0.50 0.50 0.22** 0.19**
4. Prior growth 11.22 2.15 −0.15** −0.10* −0.03
5. Stakeholder integration 4.75 0.53 −0.06 0.19** 0.33** 0.34** (0.76)
6. EO 4.12 0.81 0.32** 0.21** 0.28** 0.19** 0.39** (0.78)
7. ESO 5.33 0.73 0.17** 0.14* 0.11* 0.29** 0.37** 0.34** (0.84)
8. New venture performance 4.96 0.68 −0.05 −0.06 0.21** 0.31** 0.23** 0.26** 0.38** (0.85)
a
Logarithmic transformation of original variable.
*p ˂ 0.05; **p ˂ 0.01 (two‐tailed test).
SD, Standard Deviation.
6 AMANKWAH‐AMOAH ET AL.

TABLE 3 Results of the moderation effect of EO and stakeholder Although no hypothesis was specified for the relationship
integration on environmental sustainability orientation between EO and ESO, this study found a positive and significant
Dependent variable: environmental relationship between EO and ESO (β = 25, p < 0.01). This confirms
sustainability orientation (N = 242) the results of extant studies in the area (DiVito & Bohnsack, 2017;
Independent Variables Model 1 Model 2 Model 3 Model 4 Roxas et al., 2017). Similarly, no hypothesis was proposed for the
Control variables impact of ESO on new venture performance; however, this study
Firm agea (years) 0.04 0.09* 0.09* 0.08* found a positive and significant relationship between ESO and venture
Firm sizea (employees) 0.12* 0.11* 0.10* 0.13* performance. Again, this study is consistent with other studies (Roxas
Market scope 0.03 0.05 0.02 0.03 et al., 2017).
Prior growth −0.05 −0.03 −0.04 −0.06* Hypothesis 1 argues for a moderating effect of stakeholder inte-
Direct effects gration on the relationship between EO and ESO. The results of the
Entrepreneurial 0.25*** 0.24*** 0.16*** hypothesis test revealed a positive and significant moderating impact
orientation (EO) of stakeholder integration on the link between ESO and SI (β = 0.49,
Stakeholder integration (SI) 0.21*** 0.20*** p < 0.01). Figure 2 indicates that the effect of the EO and ESO rela-
Moderating effect tionship is stronger at high levels of stakeholder integration.
H1: EO x SI 0.49*** Hypothesis 2 predicts a moderating impact of stakeholder integra-
Model Fit Statistics tion with respect to the relationship between ESO and new venture
F‐value 2.1 7.5*** 8.9*** 9.8*** performance. As shown in Table 4 (Model 6), the effect of ESO and
R2 0.10 0.16 0.27 0.39 new venture performance is amplified at greater levels of stakeholder
ΔR2 – 0.06* 0.11*** 0.12*** integration (β = 0.55, p < 0.01). This result offers support for Hypoth-
Mean VIF 2.10 1.33 2.07 1.37 esis 2. Similarly, Figure 3 shows that at high levels of stakeholder inte-
a
Logarithm. gration ESO exerts stronger effects on new venture performance.
***p < 0.001; **p < 0.05; *p < 0.1. To test the notion that ESO mediates the link between EO and
new venture performance, this study followed Baron and Kenny
(1986). This procedure suggests that mediation is achieved when (i)
TABLE 4 Results of moderated mediation analysis
the independent variable significantly predicts both the dependent
Dependent variable: new venture performance
(N = 242)
Independent Model Model Model Model Model Model
Variables 1 2 3 4 5 6
Control variables
Firm age (years) −0.06* −0.07* −0.09* −0.05 −0.04 −0.07*
Firm size 0.03 0.02 0.05 0.04 0.05 0.03
(employees)
Prior growth 0.11* 0.12* 0.13** 0.11* 0.12* 0.13**
Market scope 0.08* 0.07* 0.08* 0.09* 0.07* 0.11*
EO 0.14** 0.13** 0.14** 0.03 0.13**
Stakeholder 0.15*** 0.20*** 0.16*** 0.18***
integration (SI)
EO x SI 0.25*** 0.26*** 0.25**
Environmental 0.14** 0.15*** FIGURE 2 Interaction effect of EO with stakeholder integration on
sustainability environmental sustainability orientation
orientation
(ESO)
ESO x SI 0.41*** 0.39***
H2: ESO x SI 0.55***
Model Fit Statistics
F‐value 3.5* 5.9** 7.8*** 8.2*** 9.2*** 9.6***
R2 0.11 0.18 0.27 0.39 0.48 0.52
ΔR 2
– 0.07* 0.09*** 0.12*** 0.09*** 0.04
Mean VIF 1.20 1.07 1.79 3.17 2.06 1.88
a
Logarithm.
***p < 0.001; **p < 0.05; *p < 0.1.

for the moderation analysis and 3.17 for the mediation analysis. The
results suggest that multicollinearity did not pose a concern in the FIGURE 3 Interaction effect of ESO with stakeholder integration on
study as the VIF values obtained are <10 (Barringer & Bluedorn, 1999). new venture performance
AMANKWAH‐AMOAH ET AL. 7

variable and mediator variable, (ii) the mediator variable significantly van Burg et al., 2012; Voss, Sirdeshmukh, & Voss, 2008), ESO
predicts the dependent variable, and (iii) the mediator variable is appears to be an effective mechanism for such firms to sidestep
included in the regression equation, and the influence of the indepen- some of the constraints to their development in emerging markets.
dent variable on the dependent variable is attenuated. This approach Given that we are in the era of transient advantage (McGrath,
suggests that a full mediation is reached when the impact of the inde- 2013), ESO can be viewed as an underutilised and untapped source
pendent variable on the dependent variable is non‐significant when of information and knowledge for SMEs to develop and sustain a
the mediator variable is included. Conversely, a partial mediation is competitive edge.
met when the effect of the independent variable on the dependent
variable is weakened but remains significant.
The results of the mediating effect of stakeholder integration
5.1 | Contributions to theory and practice
show that the effect of stakeholder integration on the relationship This study theoretically extends previous research in many ways.
between EO and new venture performance is significant (β = 0.25, First, the study theorises that, although EO is essential for small firms
p < 0.001) (Model 6, Table 4). Table 3 also shows that there is a signif- to become environmentally sustainable, stakeholder integration
icant relationship between stakeholder integration‐moderated EO and exerts a strong and positive force on this relationship. A dominant
ESO (β = 0.49, p < 0.001). Also, stakeholder integration‐moderated view is that small businesses lack the resources to pursue sustainable
ESO is significantly related to new venture performance (β = 0.55, environmental practices, unlike large firms (Katila & Shane, 2005).
p < 0.001), as shown in Model 6 of Table 4. This study challenges this notion by contending that the interaction
As shown in Model 5 of Table 4, the regression coefficient for the of EO and stakeholder integration exerts greater force for small firms
effect of EO on new venture performance tends to be insignificant to be environmentally sustainable in a developing country setting.
when EO is added into the regression equation. The regression coeffi- Thus, this study shows that the successful implementation of EO to
cient decreases from β = 0.14, p < 0.05 in Model 2 to β = 0.03, n.s. in achieve excellent ESO requires the integration of stakeholders. Sec-
Model 5. This suggests that ESO fully mediates the positive link ond, this study adds to previous research that examines the effect
between EO and new venture performance in this study. To establish of ESO on performance (Golicic & Smith, 2013; Molina‐Azorín,
the robustness of the mediation test, this study used the Sobel (1982) Claver‐Cortés, Pereira‐Moliner, & Tarí, 2009; Roxas et al., 2017). By
test to calculate the quantum of the unstandardised indirect effect and investigating the moderating role of stakeholder integration on the
its related standard error. The results of the Sobel test show that the ESO‐performance linkage, this study shows firm‐level conditions
indirect effect of stakeholder integration‐moderated EO on new ven- under which ESO is more positively related to performance. Such
ture performance (Sobel statistic = 1.33, p < 0.05) was as expected an interaction has anecdotally been suggested but, at present, it is
and statistically significant. This provides further support for evidence not understood. In doing so, this study also contributes to the funda-
of full mediation. mental propositions of the NRBV (Hart, 1995). While this view high-
lights environmentally friendly capabilities as key sustainable business
practices, the findings from this study show how small firms from
5 | D I S C U S S I O N A N D CO N C L U SI O N developing country markets can manage their strategic orientations
and firm‐level capabilities to enhance firm performance. Third, the
The main objectives of this study were to investigate when (i.e. under findings from this study add to scholarly efforts to understand the
what conditions) the indirect effect of EO on new venture perfor- processes through which firms' strategic orientations such as EO
mance is most effective. Using insights from an emerging economy, and ESO ultimately impact firm‐level outcomes such as new venture
that is, a sample of SMEs in Ghana, it was found that the effect of performance. Efforts to understand these relationships have been
ESO mediates the relationship between EO and new venture perfor- adjudged an important task in entrepreneurship (Aragón‐Correa,
mance, and that this relationship is moderated by stakeholder inte- Hurtado‐Torres, Sharma, & García‐Morales, 2008; Aragón‐Correa &
gration. These findings are consistent with extant research Sharma, 2003; Roxas et al., 2017). Results from this study contribute
suggesting that small businesses in developing market settings can to this task by adding stakeholders to two strategic orientations to
benefit from being environmentally friendly (Roxas et al., 2017). The explain their effects on new venture performance (Shubham, Charan,,
current study shows the crucial enabling role of stakeholder integra- & Murty, 2018).
tion in the relationship between EO and ESO, and firm performance Beyond the implications for theory, the results show that stake-
in a developing country. These findings show that, although small holder integration can assist SMEs to implement EO to shape their
firms can achieve environmental sustainability and performance when ESO for performance. The effect of EO on ESO is amplified when
they implement EO, stakeholder integration can help entrepreneurial there are greater levels of stakeholder integration. Similarly, the
small firms to become environmentally sustainable and achieve even impact of ESO on performance is bolstered at high levels of stake-
higher success in an emerging market context. Accordingly, further holder integration. These findings are particularly crucial for entrepre-
evidence is provided to support the theoretical contention that ESO neurial SMEs that operate in emerging market settings to understand
can equip small firms to achieve superior performance and thereby the implications of stakeholder integration at the firm level. That is,
enable them to enhance their organisational robustness (Hart, for entrepreneurial SMEs to be environmentally sustainable and even-
1995). Given that a lack of financial resources inhibits small firms' tually achieve success in emerging market settings, this study shows
ability to explore new ideas and innovate (De Carolis et al., 2009; that the integration of stakeholders cannot be ignored.
8 AMANKWAH‐AMOAH ET AL.

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